Revolutionize Warehousing with the Advantages of Automation

Guest: Rebecca Marquez, Director, Custom Research, PMMI

In this episode, we explore the exciting world of warehouse automation. We discuss how labor shortages and the e-commerce boom are driving the push to automate, and we share insights from a recent industry report, Packaging and Automation in the Warehouses of the Future, including which warehouse tasks are getting automated and what's on the horizon.

Sean Riley:
So with all the fancy introductions out of the way welcome back to the podcast Rebecca.

Rebecca Marquez:
Thanks for having me.

Sean Riley:
Pleasure is all ours. Today we are talking warehouse automation and automation has been a huge topic for it feels like years now whether it's for labor issues just to get things out faster. Basically automation's time has come but why specifically automation of warehousing? What makes warehousing such a ripe opportunity for automation?

Rebecca Marquez:
It does feel like we've been talking about this for a long time doesn't it?

Sean Riley:
Yeah.

Rebecca Marquez:
Every meeting every conversation automation it seems like it's been going on and on. But you mentioned one thing labor shortages and that's also been a conversation that we've been having for a long time which was really exacerbated by the pandemic and we're still experiencing that. I think we're not the only industry that's experiencing that but it is one of the big drivers of having to automate processes. And so I think in warehousing that's definitely one of the drivers as to why warehousing is being singled out. And then also warehousing specifically becoming a hot topic like the automation of those processes because of the changes or the rise in e-commerce and direct to consumer.

That was also a big part of the pandemic. Everyone wanted or needed things delivered right to their door because we couldn't go anywhere we didn't want to go anywhere we didn't want to see other people. So there was a huge shift to that kind of channel and that hasn't really slowed down all that much either. I mean that's a huge piece of convenience for people and we seem to like that. So that shift is really leading to some automation needs as well. And I think that's why warehousing is really looked at specifically in terms of how can we make these processes easier?

So you have a combination of I cannot keep people I cannot find people along with holy cow I need to get this new channel set up we're going into direct to consumer my e-commerce is really increasing what am I going to do? Generally the answer is automation of some sort. When we did this study for this report and we interviewed CPGs because we interviewed CPGs for this report almost half of them are expecting D2C or direct to consumer to increase over the next three years. So we really are not expecting this to slow down. I mean really this is only expected to increase.

Sean Riley:
You literally read my mind because that was what I was going to ask as the question is this something that we expect to continue is this something that everyone just came out of the pandemic but everybody loves it so it's going to stay that way so that's why this is so important?

Rebecca Marquez:
We're thinking it's going to stay that way.

Sean Riley:
Yeah. Okay. How about companies that are in markets that don't do as much to direct to consumer business? How are they incorporating automation?

Rebecca Marquez:
Well when we did this study what we found is that companies that have less demand for direct to consumer are definitely relying more on 3PLs. And it seems like the cutoff or the tipping point for that is around 20%. And what I mean by that is if a brand does less than 20% in D2C they're likely going to use a 3PL. If they do more than 20% they're likely going to invest in automation. So for our members it's kind of a magic number that was uncovered in our study for this report. However interestingly it should be noted that it's not only small CPGs or those that carry out small amounts of e-commerce business that are turning to 3PLs there's actually more types of companies that are doing that. There are some CPGs whose business is entirely done through e-commerce and they are relying on 3PLs for their direct to consumer fulfillment and distribution.

We're seeing that 3PLs are going to continue to play an important role in D2C fulfillment for CPGs even as brands build their own capabilities. So some brands with a wide variety of products manufactured at different facilities don't want to spend the money on transporting goods between internal sites and that means that if they were to perform their own D2C fulfillment themselves it would be very expensive for them. So instead they're choosing to use a 3PL and ship all goods to a central location where products can then be mixed into a single package and distributed to consumers. It's just a more economical choice for them in some cases to turn to a 3PL. So just keep in mind it's not only really small businesses that are turning to 3PLs it is a variety of businesses.

Sean Riley:
Interesting. Yeah that would've been a question I would've asked and you answered it whether it was just small companies that were doing that but apparently it's everybody. Okay so we have a sense of why brands are automating warehouse op what areas of warehouse operations are they choosing to automate the most?

Rebecca Marquez:
I will say that the journey toward automation especially warehouse automation is just that it's a journey. And even at the top of this conversation we were talking about how long we've been discussing this. It seems like a really long time that we've been talking about automation. Currently two of the most automated processes within the warehouse are associated with logistics and that's warehouse management and inventory control. So we're really looking at softwares and stuff like that. This is probably due to the fact that both of those have a lower cost of implementation and a more appealing return on investment because of that lower cost of implementation.

It's way more economical probably than doing some kind of really significant change to your infrastructure or via machinery. However for machinery we found that palletizing and depalletizing and secondary packaging have the highest levels in warehouse processes. There are so many processes though in the warehouse that are staying manual which is crazy to me. And when interviews were conducted for this study we did find that a lot of processes were still manual. Over 60% of the brands that we talked to were saying that a lot of the other processes that were involved in the warehouse are fully or mostly manual still.

Sean Riley:
Wow.

Rebecca Marquez:
It's crazy. But keeping that in mind even though more than half of CPG respondents in the study are saying that that much is still manual still 65% are also reporting that they are increasing investment in automation and that they have increased investment over the last three years. So we are seeing that this is on the rise it is happening. It's just it's a process it takes some time these can be expensive things to implement and we're talking to businesses of all sizes so it is going to take some time but it is happening.

Sean Riley:
Okay. Well that's good to hear. While talking of palletizing and depalletizing and logistics is the growth projected to stay there or are we expecting the growth to happen in other parts of the warehousing automation?

Rebecca Marquez:
Well we're projecting it to stay there. It is going to stay there and one of the main reasons for that is that over time and I've mentioned this a couple of times already there's been sort of a shift toward layered pallets and mixed case pallets due to skew proliferation. Now that push towards those different kinds of palettes provides a lot of potential for our members because currently when you have a mixed palette like that it's a pretty manual process for a lot of brands because it's complex compared with a single skew palette where you just program it in and you can just put it in a robotic palletizer or whatever kind of palletizer you have. With a mixed palette it's just a little more complicated. And so a solution to building complex pallet at a lower price point is really an opportunity for OEMs just because a lot of companies are keeping it a manual process this is kind of a wide open playing field for OEMs especially since we're seeing this trend on the rise. We don't see this going away particularly with labor shortages too.

And one of the other underlying drivers for this is that this kind of manual activity of palletizing depalletizing is extremely laborious and time-consuming and it can lead to a lot of work-related injuries. And I just recently conducted a focus group maybe about a month ago and one of the people in my focus group as an aside worked for a poultry processing company and not a really large one but we'll just say a poultry processing company where he was telling me that all of their processes are manual that the company management is refusing to automate anything at all warehousing and anything.

Sean Riley:
Wow.

Rebecca Marquez:
What he told me and the group interestingly was that management's opinion and this is not his opinion but management's opinion is that they're reluctant to automate anything because and I quote people don't break machines break. All I could think of was but people do break.

Sean Riley:
Yeah. That's what I'm thinking.

Rebecca Marquez:
People do break and people are very expensive to fix which actually another participant in the group said and is true. And this is another excellent case for automating processes. Anytime you have repetitive motion above the shoulder it can lead to really serious work-related injuries. And plus then you also have low throughput too. And I mean at the end of the day we want to get stuff done and we want to get it done quickly and you want to keep your workforce healthy. So we are looking at growth staying in those areas however that all being said according to our study we're looking at growth in several other areas too. We heard people talking about automating boxing and carting mobile robots and AGVs are definitely ... we're looking at those on the rise as well labeling and storage and retrieval systems interestingly enough.

Sean Riley:
So it's coming it's just like you said it's a journey. It's going to come piece by piece it's going to start at the end of the line and work its way back.

Rebecca Marquez:
I think that's how it's going to go.

Sean Riley:
Okay